While the Trump Administration’s approach to bank regulation has been the subject of much speculation, specific proposals have yet to emerge, and the administration has yet to name key personnel in the regulatory agencies. However, recent commentary from two key players in the current bank regulatory leadership suggests a path forward for the Administration’s regulatory agenda.
In a January 21, 2025, statement, the Acting Chairman of the Federal Deposit Insurance Corporation (“FDIC”), Travis Hill, outlined an extensive list of matters that the FDIC will “focus on in the comings weeks and months.” The list includes the following key items:
- a wholesale review of regulations, guidance, and manuals to ensure that the agency’s approach to bank regulation “promotes a vibrant growing economy;”
- the adoption of a “more open-minded approach” to innovation and the adoption of new technologies by the banking industry including (i) a more transparent approach to fintech partnerships, digital assets, assets and tokenization and (ii) agency engagement with community banks that face growing technology costs;
- scrapping the FDIC’s 2024 Statement of Policy on bank mergers in favor of a new approach that ensures timely approval of mergers that satisfy the requirements of the Bank Merger Act;
- withdrawal of prior “problematic” proposals adopted during the Biden Administration, including proposed rules on brokered deposits and corporate governance;
- adoption of improvements to the supervisory process to ensure that examiners are focused on core financial risks and less on process;
- a reevaluation of the supervisory appeals process;
- enhancement of the FDIC’s “readiness and preparedness” to resolve large financial institutions, including the assimilation of lessons learned from the large bank failures in 2023;
- adjustments to the capital and liquidity rules to better harmonize economic growth with safety and soundness concerns;
- adoption of policies that encourage de novo bank formation to ensure a “healthy pipeline” of new entrants in the banking sector;
- address de-banking concerns to ensure that law-abiding customers have access to banking services; and
- modernization of rules that implement the Bank Secrecy Act.
Separately, Federal Reserve Board Governor Michelle Bowman, a rumored candidate to lead the agency’s bank supervision portfolio, offered her perspective on forthcoming changes to the bank regulatory framework in remarks before a state banking group.
Bowman criticized “binary thinking” about the bank regulatory framework that focuses solely on whether regulators are hard enough or too lenient on banks. The binary approach, according to Bowman, suggest an adversarial model for bank regulation rather than a recognition of the shared goal of banks and their regulators to create a safe, sound, and effective banking system that promotes stability for the U.S. financial system. Bowman highlighted three areas where regulators “can support the banking system by adopting a more pragmatic approach” to regulation:
- Bowman called for adoption of a supervisory approach that prioritizes safety and soundness while limiting the regulatory focus on matters that are not essential or are tangential to statutory requirements. She cited proposals relating to bank capital requirements and the application of rules for global systematically important banks to small entities.
- Next, Bowman recommended a reconsideration of proposals that would “materially reduce the tailoring of regulatory requirements.”Bowman noted that greater differentiation in regulatory expectations based on size, business model, risk profile, and complexity would avoid the “push down” of regulatory requirements intended for larger banks to smaller banks and, particularly, community banks.
- Finally, Bowman cited the need to improve transparency throughout the regulatory process, calling on regulators to “show their work” to promote fairness for regulated institutions and to provide both the institutions and the public with a better understanding about the link between specific actions and broader regulatory goals.Bowman noted that a wide range of information is shielded from public scrutiny under the rubric of confidential supervisory information and that “becomes a barrier to banks engaging in discussion with peers and other regulators to better understand supervisory expectations.”
Although greater clarity regarding the regulatory agenda must await key appointments in the leadership of the federal banking agencies, the statements by Acting FDIC Chairman Hill and Governor Bowman provide solid indicators of how the new Administration will approach the regulation of financial institutions. Nevertheless, it is clear that bankers can anticipate less regulation, a more flexible supervisory process, and new opportunities to incorporate financial innovation and technology into their business model.
